What Is The Difference Between Universal And Term Life Insurance?

Life insurance policies are designed to provide financial protection to beneficiaries when the policyholder dies. Two popular types of policies are term life insurance and universal life insurance. Here’s a breakdown of the differences between these two policies:

Term Life InsuranceUniversal Life Insurance
Provides coverage for a specific period of timeProvides coverage for the life of the policyholder
Generally more affordable than permanent policiesMore expensive than term policies
May include coverage for dismemberment and accidental deathHas a savings component that builds up over time on a tax-deferred basis
Expires after a specified number of yearsDesigned to last until the policyholder’s death
Can be renewed or converted to a permanent policySubject to penalties if terminated early
Typically cheaper for younger policyholdersPremiums remain the same throughout the policyholder’s life

Term life insurance is appropriate for those looking for basic coverage for a specific period of time, such as young families on a budget. Universal life insurance is suitable for those who want coverage for their entire life and benefit from the cash value savings component.

It’s important to consider the pros and cons of each policy type before making a decision. For personalized guidance, consult a professional financial advisor who can help you determine which policy best fits your needs.

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